Next story in Hardball with Chris Matthews

CHRIS MATTHEWS, MSNBC HOST: Tonight, President Bush accepts the resignation of his top aide, does this mean he‘s getting the White House ship shape or just that the first mate is jumping ship? Let‘s play HARDBALL.

Good evening. I‘m Chris Matthews. President Bush has been under pressure from his own party to stave off the second term slide in this crucial election year.

Critics have pushed the president to shake up a staff that remains largely intact from his first term. Today, the president announced the resignation of White House Chief of Staff Andy Card, and the promotion of his budget director Josh Bolten to replace him. But is the president too insulated from the outside to find and recruit a new team?

Where‘s the new blood? And was Andy Card really the problem? Does his departure really promise a solution? Should the country expect real change with big shots Karl Rove and Dick Cheney still at the helm.

Murphy‘s Law has plagued Bush‘s second term from Iraq to Katrina to the port deal to the failed attempt to reform Social Security to the CIA leak scandal. Political blunders have sent Bush‘s poll numbers plunging. More on the staff shakeup with NBC News chief White House correspondent David Gregory in a moment. And later, California Governor Arnold Schwarzenegger is taking to the airwaves with a new TV ad, we‘ll talk about the California governorship. But first, HARDBALL‘s David Shuster has this report on today‘s staff shift at the White House.

(BEGIN VIDEOTAPE)

DAVID SHUSTER, HARDBALL CORRESPONDENT (voice-over): It could be a White House personnel shift, but in the midst of low approval ratings and growing calls to shake up his staff, President Bush today announced the resignation of his chief of staff, Andy Card.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: After five and a half years, he thought it might be time to return to private life. And this past weekend, I accepted Andy‘s resignation.

SHUSTER: Card is a longtime friend of the Bush family, as a mostly behind the scenes player in the administration, Card‘s most public moment came on 9/11 when he whispered into the president‘s ear that the nation was under attack.

BUSH: I have relied on Andy‘s wise counsel, his calm in crisis, his absolute integrity and his tireless commitment to public service.

SHUSTER: Throughout his service though, Card has overseen some of the biggest missteps of the Bush presidency, from the White House overreach on Social Security reform, to the mistakes with Hurricane Katrina, to the failed supreme court nomination of Harriet Miers, to the politically disastrous Dubai port deal to the hear no more, speak no more, see no more of the CIA leak scandal.

Card also played a role in the controversy over the president‘s domestic spying program, urging Attorney General John Ashcroft, while in the hospital, to approve a bypass of the courts. But perhaps most significant, Card was a leading figure in helping the White House sell the war on Iraq.

ANDREW CARD, FMR. WHITE HOUSE CHIEF OF STAFF: If we have to go to war we will, and as the president said we will go to war, we will win and there will be no question about it.

SHUSTER: Just before the emotional one year anniversary of the 9/11 attacks, with the wounds still fresh, Card assembled a strategy team known as the White House Iraq group. It consisted of top officials whose goals, starting after Labor Day 2002, was to convince the nation that the war on terror required invading Iraq, which had no detectable role in 9/11.

In an interview with The New York Times, Card said, quote, “From a marketing point view, you don‘t introduce new products in August.”

Three and a half years later, the war in Iraq is pulling down the president‘s poll numbers across the board, and it has left Republicans fearing they will lose control of Congress in the midterm elections. Associates of Andy Card said he felt the stress and submitted his resignation weeks ago. The president accepted it over the weekend. Today the president‘s longtime friend was teary eyed.

CARD: I‘ve watched you as a person. You‘re a good man, Mr.

President, and you do great things.

SHUSTER: For the president‘s critics, the choice of Budget Director Josh Bolten to take over for Andy Card is not viewed as a major shakeup. Bolten is another longtime Bush friend and he served as deputy chief of staff before working the last three years in this administration as budget director.

JOSHUA BOLTEN, INCOMING WHITE HOUSE CHIEF OF STAFF: I‘m deeply honored now by the opportunity to succeed Andy Card as White House Chief of Staff. I say succeed Andy Card, and not replace him, because Andy cannot be replaced.

SHUSTER: An hour after the appearance in the Oval Office, the president joined members of his cabinet in the Rose Garden, following a cabinet meeting to assure that other changes are also in the works.

BUSH: We talked about their need to assume additional responsibilities. To make sure that we‘re using every element of national power to win the war on terror and to secure the peace.

SHUSTER (on camera): The problem for the White House is that as long as the violence continues in Iraq, no amount of talk about cabinet members or other administration officials might make much difference. And even if it did, in this White House, the chief of staff doesn‘t have nearly as much power as Vice President Cheney. I‘m David Shuster for HARDBALL at the White House.

(END VIDEOTAPE)

MATTHEWS: Thank you, David Shuster. Let‘s go now to NBC News chief White House correspondent, David Gregory. David, what does this portend, this shift of chiefs of staff?

DAVID GREGORY, NBC NEWS CHIEF WHITE HOUSE CORRESPONDENT: It‘s a highly symbolic move. The chief of staff is such an important figure in the White House, so switching Andy Card out, accepting his resignation, now paves the way for more changes.

I‘ve spoken to officials in this building who say the president has been very clear that Josh Bolten will have a free hand, meaning that other changes may come, and the president recognizes that when you change at the very top of the staff, that further changes could come and could even be necessary.

They‘ve been very careful about how they talk about the president‘s views on this. The president does not like to respond to outside advice. You hear him in press conferences say that everyone wants to give him advice, and he takes it in, but doesn‘t necessarily act on it. He doesn‘t like people who worry about him on the outside or push him into action on the outside, but there is a familiar pattern here.

The president‘s political standing has eroded, he‘s resisted calls for a shakeup, ultimately he relents as he did in this case, and a lot of the story line is about how Andy Card felt it was time to go. Officials saying here they both recognize the president and Chief of Staff Andy Card that it was time to make a change and make it now.

MATTHEWS: What do you make of the president statement saying how cabinet officials need to assume additional responsibilities. Was that a shot at members who have said it‘s not my job? The interagency committee led by Bob Kimmitt blew the thing on Dubai.

Nobody did PR studying or any kind of market research on the Social Security changes. Nobody seemed to know a lot about a lot of things like Katrina, everything slipped somewhere between FEMA and Department of Homeland Security. Was he saying to you guys, start watching out, be troubleshooters, stop saying it isn‘t your job, fix these problems before they emerge?

GREGORY: What the president wants to do is pump some new blood into The West Wing. Get the counter on zero again and try to rebuild. Changing out Andy Card is part of that. I think the president recognizes that he‘s coming off frankly a terrible period politically, and that at some point, he‘s got to try to rebuild and he can do it by Card, he can also do it by reminding people that they‘ve got to have fresh legs here, we‘re not just going to coast to the finish line.

The president has told people that whatever the political distractions, he wants to sprint to the finish of this term and he needs the people around him with the fresh ideas and fresh legs to do that. At lots of different levels here, the president is trying to get people fired up.

MATTHEWS: The president may be in a gilded cage. In his own words, a couple of weeks ago, he said, and you know this better than I do, he said he‘s surrounded himself with people he trusts. It‘s almost like he has surrounded himself to the point where he doesn‘t meet new people. He said he doesn‘t read the papers, he relies on the briefings he gets. You don‘t see anybody driving in there from the North Gate that he might be meeting who might make up a better staff than he‘s got, do you?

GREGORY: There‘s truth to a lot of that, and I think this choice says a lot about how the president approaches this. He wants some change. He recognizes it‘s necessary. A lot of times this is a White House that‘s slow to change, slow to recognize what they have to do, and Josh Bolten is a different guy than Andy Card, but how different really?

Both men are very close to Bush, spent a lot of time around him going back, in the case of Bolten, back to the campaign when he was the economics adviser to then Governor Bush in 2000. So what Bush cares about most, what the president cares about most, is continuity, and having a loyal group around him. Look, he‘s very demanding on people who are working for him. I‘ve talked to—

MATTHEWS: Why have they blown so many cases. They‘re not good troubleshooters. I mean, Andy didn‘t catch the Dubai problem before he started, he didn‘t get the president to watch television on Katrina, get on top of that one. Andy Card pushed Harriet Miers, he was out there at Camp David that weekend. That was an unbrilliant decision to pick her.

Why doesn‘t he have troubleshooters around who read the papers, watch all the news, get on top of things, call people constantly and warn him of trouble almost like an Indian scout before he gets attacked?

GREGORY: I‘m not entirely convinced that that doesn‘t always happen. You ticked off a couple of examples where the president was driving the train, on Harriet Miers particularly. There‘s no question that the president‘s told people, it was clearly at the lower levels that they missed the Dubai ports deal. So look, clearly things are being missed, but I think it‘s a question of the president‘s comfort level, for better or for worse, about who he wants around him.

He has never been comfortable with what the conventional wisdom in Washington tells him, which is, you got to get somebody like a Fred Thompson or another so-called graybeard to come in and advise you on the ways of Washington. He‘s seen all of that up close and frankly doesn‘t trust it. So whether it works for him or it doesn‘t, he wants a closer group, and as I say, and as I think you‘ve been recognizing, he‘s trying to pump some new air into this place this week.

MATTHEWS: Well, someday I expect to see Walter Cronkite on the White House lawn there, joining the White House team, a real graybeard. Anyway, thank you David Gregory for joining us.

Pat Buchanan served in the Nixon and Reagan White House, and is an MSNBC political analyst. Rodney Slater was secretary of transportation in the Clinton administration.

MATTHEWS: When you‘ve been in on the inside of one of these cabinets, what looks—what does a shakeup like this tell you? Do you think he walk or he was kicked?

SLATER: Well, I think when you‘re looking at an Andy Card with the relationship that he has had over the years with President Bush, that it was probably a joint decision. I believe the accounts would suggest that he went into the president to say look, this is the lay of the land. Someone probably has to go. I‘m willing to leave if that‘s necessary. I think ...

(CROSSTALK)

MATTHEWS: Where you there when Leon Panetta, who was budget director, was pushed up to being chief of staff?

SLATER: Well, I was never on the White House staff. I was always ...

MATTHEWS: But you saw that happen, right?

SLATER: I did, right.

MATTHEWS: Did that accomplish anything?

SLATER: Well, I think it did bring in new blood. It brought in new thinking, new relationships, and I think any administration has to do that from time to time, actually.

MATTHEWS: Pat, it just looks to me like, once again, the number two guy moves up to number one, the classic problem of a second term. The deputies all get the big jobs.

PAT BUCHANAN, MSNBC POLITICAL ANALYST: Well, I was in three transitions of chief of staff. The first one, of course,rMD+IN_rMDNM_ was when Haldeman went out and it was very traumatic. And the president ...

MATTHEWS: Why did he leave the White House?

BUCHANAN: Because of Watergate, because some of us recommended it might be a good idea. But the president, who did he go to? He went to Al Haig, who had been a colonel under Kissinger for three and a half years, and then gone over to Fort Meyers as deputy chief of staff and he wanted somebody who A, could go right into the senior staff meeting, because that‘s the job he does; secondly that he could sit there and feel comfortable with as president of the United States and talk man to man.

This is exactly what George Bush wants. He doesn‘t wants somebody coming laterally he doesn‘t know, he‘s got to introduce himself to, who is sitting down from him, Chris, for an hour every morning and telling him what the senior staff decided and what they think he ought to do.

MATTHEWS: It‘s very hard to trust a person in Washington.

BUCHANAN: But I‘ll say this for Reagan. I mean, Reagan, when I was there—when I came in with Regan, chief of staff, when Baker‘s team came out, whole new staff. And then when Regan left, of course, it was under tough ...

MATTHEWS: Why did he leave?

BUCHANAN: He left because of the Iran-Contra thing.

(CROSSTALK)

MATTHEWS: I just want to remind everybody of the numerous scandals to which you‘ve had firsthand experience.

BUCHANAN: But, you know, let me say this about Don Regan. I think it‘s a cheap shot. Regan let be Reagan by Reagan. That‘s what the problem was. He didn‘t interfere with his decision.

MATTHEWS: And that was a bad decision.

BUCHANAN: Well, I couldn‘t override it. I think he was a bum wrap for Regan. But when we left ...

MATTHEWS: He also gave a hard time to Nancy Reagan, which cost him his job.

BUCHANAN: Well, Howard Baker—I mean, Deaver and Nancy Reagan ran on it, and Howard Baker was brought in. He brought in a new team, and so that‘s when I departed myself.

MATTHEWS: I‘m sorry for kidding you, Pat.

(CROSSTALK)

MATTHEWS: People need to know the historic context.

BUCHANAN: You were in the Carter administration, you understand this Chris.

(CROSSTALK)

MATTHEWS: We didn‘t have major scandals. Up next, is there room for change in the Bush-Cheney-Rove White House? We‘ll be right back with Pat Buchanan, the veteran, and Rodney Slater, former secretary of transportation.

And later in the—well, the Bush base bolding on illegal immigration? You‘re watching HARDBALL on MSNBC.

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MATTHEWS: Welcome back to HARDBALL.

We‘re talking with MSNBC political analyst Pat Buchanan, who served in the Nixon, Reagan White Houses; and Rodney Slater, who was secretary of transportation in the Clinton administration.

We‘ve got some new polls out we wanted to show you tonight. One them is—let‘s take a look at them. A new Pew Research poll shows that a whopping 66 percent of Americans, two-thirds, say the U.S. is losing ground in preventing a civil war in Iraq. Fifty-one percent, a slight majority, say we‘re losing ground in defeating the insurgents, which is much more important, perhaps. And 38 percent say we‘re losing ground in establishing a democracy.

Here‘s President Bush today after his cabinet meeting.

(BEGIN VIDEO CLIP)

BUSH: My cabinet officials, obviously, have got many responsibilities in their agencies, but we talked about their need to assume additional responsibilities, to make sure that we‘re using every element of national power to win the war on terror and to secure the peace.

(END VIDEO CLIP)

MATTHEWS: Well, we heard the birds there, Mr. Secretary. I thought that was very refreshing. Maybe that‘s how he‘s going to freshen up the White House staff, having outdoor meetings. But look, the question is the president, will he make another cut? Do you see another one coming, based on the pattern of today?

SLATER: Well, he could. And as was noted earlier with the new chief of staff, he‘ll have responsibility for dealing with the White House staff, clearly with the advice and input of the president. But then you also have the cabinet to look at, and who knows what might happen there.

MATTHEWS: The usual pattern in our business, your business now, television, is you bring in a new president, and his first job is cost-cutting. His first job is to lop off heads, and it may also be true with the chief of staff.

Do you believe this job of Josh Bolten now is to come in after Andy Card, who had all these personal relationships with people, and the president says to him, now, your job is to get rid of the lightweights we‘ve got around here, the deadwood around here that‘s not responding to the crises, so I don‘t have to keep being hit with them?

BUCHANAN: The biggest name in the White House, of course, is not Josh Bolten or Andy Card, it‘s Karl Rove. I could see changes in—they have got problems in Congressional liaison. Clearly, I could see changes there. But, Chris, these aren‘t the kinds of changes I think that are going to be big and dramatic.

I would not be surprised to see a change, frankly, at secretary of the treasury. I mean, John Snow was—I think he was treated very badly at the beginning of the second term, but it‘s quite clear somebody is not selling the president‘s economic policy when times are relatively good in macroeconomic terms, and about 35 percent of the country think he‘s handling the economy well.

MATTHEWS: Why do you think that is, Mr. Secretary? Why do you think the president, who has got a—not a terrible economy, in fact, better than it was—gets no credit for it in the polling. Do you know that the latest polling shows that people trust Democrats more on tax cutting?

MATTHEWS: Your party is getting credit for something it‘s not known to do too often, to cut taxes.

SLATER: Well, I just think that the Iraq war is overshadowing basically everything. And I think it‘s important for the president to have his team directed towards that effort, but also focusing on the economy and out there talking about it, and the entire cabinet frankly can do that because the entire cabinet has some responsibility for that.

BUCHANAN: Let me tell you what he was doing I think. There‘s been reports that State and Treasury and the others have been dogging it on the war as—in the nation building, as compared with the Pentagon, which has these guys in there 200 percent, and I may not be correct on this, but that‘s the way I took it, Chris. Everybody‘s got to get in this Iraq thing. I agree with Rodney, Iraq is pervasive.

MATTHEWS: Let me read the president‘s word. We talked about their need, cabinet secretaries, to assume additional responsibilities, to make sure that we‘re using every element of national power to win the war on terror and to secure the peace.

BUCHANAN: That‘s exactly what I took it as, right.

MATTHEWS: So these guys you think are shirkers?

BUCHANAN: Some of them probably have other priorities and things like that. Pentagon is running the war and he‘s saying this is the ballgame, you guys, it is Iraq. Everybody put all their best resource its into this.

SLATER: I also think it means getting out of Washington. They‘ve got to be out in the hinterlands.

MATTHEWS: I find it extraordinary that he has to give an order like that in public, don‘t you?

BUCHANAN: I was surprised.

MATTHEWS: That‘s whacking these guys by doing it in public.

BUCHANAN: I guess he did it in private too.

MATTHEWS: He did it to Chertoff last week too, about the trailers.

He‘s whacking his guys in public. Not killing them in “The Sopranos” sense but just being unpleasant.

BUCHANAN: Just the same way Matthews does it.

MATTHEWS: I‘m as mild as they come. Up next, the illegal immigration issue pits Republicans against Republicans now. The hard-liners against the softliners. You‘re watching HARDBALL on MSNBC.

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MATTHEWS: Welcome back to HARDBALL.

While thousands continue to protest around the country, the Senate began debate today on an immigration reform package dealing with illegal immigration, approved by the Senate Judiciary Committee just last night. The program allows illegal workers to gain U.S. citizenship over time.

Senator Mel Martinez of Florida, whose state relies on close to a half million illegal workers to fuel its economy joins us this evening. Senator Martinez, are we going to end up with a bill that has all the right pieces, something on enforcement at the border, something on employers‘ sanctions, but also an opportunity for people who are here to legalize themselves and for guest workers to come in to work. Will we get the whole package at the end.

SEN. MEL MARTINEZ ®, FLORIDA: I‘m hopeful that we will, but it‘s still too soon to tell. I think that we‘re in a much better position to get a whole package today than we were a few days ago. What the Judiciary Committee did was great. It puts a complete bill, a comprehensive bill on the floor and now we are going to debate it as Senators do about what is the very best way to go about accomplishing all of the goals?

We have got to secure the border, we have to do something about the 11 million that are here without it being amnesty, and we‘ve got to make sure that we do something to continue to provide the labor force that this country needs and demands. And also frankly for national security, make sure that we do something to clear those that are here, so we know who they are, we know what they‘re doing and we don‘t just have an 11 million population, a state the size of Ohio, that we don‘t know who they are or why they‘re here.

MATTHEWS: I guess one part of it doesn‘t make any sense to me, which is even if you put the whole package together, the idea that if you have a legal way of coming in the country, what‘s to stop a person who is not on the list or doesn‘t make the cut to come in illegally? In fact, this new package, this Kennedy-McCain Bill that was approved by the Senate Judiciary Committee last night, basically approves 1.5 million new farm workers coming in, that‘s what Feinstein wanted.

Another 400,000 people who can make any kind of job, that‘s two million more people coming from the southern border. What‘s to stop more people from coming in in addition to that if they choose?

MARTINEZ: Well first of all we have to do it legally. Right now we have a broken down system that what we‘re creating is an illegal system of workers. What we have to do is do it legally and then those people that are coming on that basis, Chris, are going to be here for a time, they‘re going to come to take a job that no American worker wants and then at the conclusion of that employment agreement or the time of their work, they‘ll go back home. It will allow for a flow back and forth.

Frankly we‘ve done this at other times in our history and it‘s worked reasonably well. What we haven‘t done is to allow for that imbalance in our economy and our work force where we don‘t have enough workers.

Florida right now, there‘s an employer that they were saying they needed 5,000 workers to work in hotels in the tourism industry in Florida. I was talking to another fellow who said they had 250 openings of which 900 people applied. Not one was an American citizen, and so it just goes to show you that there‘s a demand for a work force that is not being met.

We have to find a legal vehicle, knowing who these people are, knowing they‘re coming to a given job to account for that process to work in a legal way.

MATTHEWS: What happened to the market though, Senator. We believe in the free market, you do too I assume. If a sheet rock guy who is putting up plaster is making five bucks an hour, you‘ll have fewer workers available. You give this guy $10 or $15 an hour, you‘ll find a lot more people preparing and teaching themselves out of high school, dropouts, whatever, to learn how to do sheet rock, carpentry, learn how to paint.

People will go to a job if it pays a living wage. Right now these jobs are barely paying a living wage, so it‘s the immigrant worker who is available. Why don‘t we just raise salaries for people so you get the guys who are unemployed in this country to work.

MARTINEZ: If you create a legal work force, then it‘s more likely that the salaries will rise, but the example is using about this guy in Florida needing 250 workers, they were nine to $14 an hour jobs, and he still could not get Americans to apply for them. There is an honest to goodness labor shortage. This is why the Chamber of Commerce supports what we‘re trying to do in a comprehensive reform.

Up next, White House Chief of Staff Andy Card resigns. Is this the change the big critics out there making all the noise were hoping for. You‘re watching HARDBALL on MSNBC.

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MATTHEWS: Welcome back to HARDBALL.

With sectarian violence in Iraq and President Bush‘s plummeting poll numbers, has the president lost control of his own party? Amid Republican calls for the White House to shake up its battle weary staff, President Bush‘s chief of staff, Andy Card, resigned today, paving the way for the president‘s budget director, Josh Bolten, to take his place.

But is Bolten, a long-time member of the president‘s inner circle, the man for the job? Is his appointment enough to satisfy Republican critics who are looking for fresh blood to invigorate the White House? And at a time when illegal immigration threatens to fracture the Republican Party, could the White House benefit from bringing in outsiders?

Bob Shrum is a HARDBALL political analyst, and Kate O‘Beirne is the Washington editor of the “National Review.”

You first, speaking for the Republican thinking here. Is there going to be a deal on immigration between the hard-liners in the Republican Party and elsewhere, who say stop the illegal immigration, no mas, and the people who say, let‘s be loosey-goosey.

Let‘s be friendly, hands across the border, in welcoming them in as guest workers, and forgiving everybody here who is illegal. Can you reach a compromise between those two points of view?

KATE O‘BEIRNE, “NATIONAL REVIEW”: You can throw them together and that‘s, I think, what the White House hopes to do. The House passed a bill that responds to Republican voters where they are on the immigration issue, which is enforcement first.

MATTHEWS: Seventy percent of those.

O‘BEIRNE: We can talk about guest worker programs once we get control of the border. The Senate yesterday, out of committee, with the support of some Republicans passed an amnesty lollapalooza. They gave amnesty to everybody in sight. And the White House said ...

MATTHEWS: There‘s nothing on employer sanctions that I could find.

O‘BEIRNE: They have some language in there, but the history, of course, of immigration law, is Congress passes enforcement laws they have no intention of enforcing. And the White House plan all along has been to get an enforcement plus guest worker amnesty plan into conference with the House, send back a bill to both the House and the Senate that includes both, and shove it down the throats of the House Republicans.

MATTHEWS: Bob Shrum, does the prospect of stopping illegal immigration work for you?

BOB SHRUM, HARDBALL POLITICAL ANALYST: Well, I think there‘s a—that you can get control of the borders, you can get some border security. It‘s never going to be perfect, but if Senator McCain, Senator Kennedy and President Bush all agree on an approach, it‘s probably a pretty good approach to the problem. And it‘s probably the place we‘re going to end up. I want to give President Bush some credit here, because he has had to stand against people in the base of his own party.

Now, politically, I think this is a very dangerous game for the Republicans, that you‘re seeing Republicans in the House like Tom Tancredo play. This is what Pete Wilson did in California in 1994 when he passed a proposition that had draconian anti-immigrant provisions. It helped him win one election, and it helped make sure that California became a solidly Democratic state by alienating Hispanic voters.

MATTHEWS: How do you stop illegal immigration, Bob?

SHRUM: Well, you have got to have more border patrol agents, which this bill provides. You have got to put more physical facilities along the border, and you‘ve got to provide a mechanism for people to come here legally, which this bill also does.

MATTHEWS: But how does giving a mechanism to come here legally stop them from coming illegally? I don‘t get the connection. If you‘re not on a list, you don‘t make the quota, you‘re going to come in illegally.

SHRUM: ... and 400,000, you‘re going to take a lot of the pressure off, because those folks are going to come one way or another, so it‘s better if they‘re legalized, it‘s better if we know that they are here, it‘s better if there‘s rules that can be followed.

MATTHEWS: And you believe America can absorb almost two million new entrants a year from the southern border to our society?

SHRUM: Oh, listen I will tell you, I think that the evidence is overwhelming that the economies that have actually welcomed new immigrants, like the United States and Britain, have done far better than the economies that have been shut down.

And the real question we‘re going to face in the next few days is whether Bill Frist, in trying to maneuver against John McCain among Republican primary voters, is going to be as irresponsible on this issue as he was when he diagnosed Terri Schiavo on the Senate floor.

MATTHEWS: Well, the fact is, Bob, it‘s not just—and Kate, it‘s not just Republicans who don‘t like illegal immigration. Seventy-one percent of the country say it‘s their number one concern. They want to stop illegal immigration. These are regular Americans. They‘re not right-wingers, and they think we ought to have a border.

And the other thing, Bob, you didn‘t mention what‘s missing in the approach of Kennedy and McCain and the president, they have no provision for stopping employers from hiring illegal people. They still leave open the opportunity for an employer who wants cheap labor to hire—who just got across the border, and it‘s not in the bill. I can‘t find it in there, do you?

SHRUM: I think we ought to have employer sanctions. We have some already. I don‘t think they‘ve been very effectively enforced over the years.

MATTHEWS: Right, that‘s true.

SHRUM: But they are not the heart of the problem. The heart of the problem is, that we have an economy that needs more workers than we actually have in this country. The truth of the matter is, you could get unemployment down to zero, and if we didn‘t have these immigrants, we wouldn‘t be able to function as an economy. Beyond that, what are we going to do? The House Republican bill is going to create 11 or 12 million instant felons?

MATTHEWS: OK, so we‘re going to close—basically, we‘re going to give preference to people who come to this country from across the southern border to those who come in from Asia or come from Europe, right, or Africa?

O‘BEIRNE: What you do ...

MATTHEWS: What kind of a social policy is that, that ...

O‘BEIRNE: Chris.

MATTHEWS: ... just a minute—that goes back to this idea of we‘re going to favor one people over another? If you say 1.9, I don‘t think that‘s—I think that‘s probably higher than the number of people coming from Europe neck year, right, Bob?

SHRUM: Are you asking me why?

MATTHEWS: I‘m asking you.

SHRUM: I don‘t think there‘s a huge desire on the part of people from Europe to come to the United States right now. Ireland, which used to send lots of people overseas, the Irish are actually moving back to.

The question is, how do you make a modern economy function and at the same time, get as much border security as you possibly can? That‘s what this bill is trying to do.

MATTHEWS: But what part of the modern economy are the immigrant workers joining?

O‘BEIRNE: Illegal aliens represent less than five percent our economy. There‘s not a single sector in our economy where they make up a majority of the workers. There are, in fact, no jobs Americans won‘t do at a certain price. What businesses, of course, want to do is import cheap labor. You could probably get 535 illegal aliens to serve in Congress for $80,000 a year instead of $160,000.

SHRUM: So you‘re ready to join me, Kate, in raising the minimum wage so that we make sure that all of these people are not paid to little?

MATTHEWS: No, the market economy would normally raise up the wage rate to get more sheet rock workers. You‘ve got people unemployed today that if you told them they‘re going to make $30,000 or $40,000 as sheet rock guys that come into their house and put up the—what do you call it, the—I‘m forgetting my old phrases now...

SHRUM: Wallboard?

MATTHEWS: Wallboard, yeah...

O‘BEIRNE: Unemployment...

(CROSSTALK)

O‘BEIRNE: Unemployment on the part of low skilled Americans is up over the past two or three years because they‘re being undercut by this cheap imported labor.

SHRUM: Let‘s raise the minimum wage.

MATTHEWS: Why don‘t you let the market drive up wages because they have to pay people more who are unemployed to be carpenters, painters, sheet rock guys. So when people want their house fixed up, there‘s people from the neighborhood who are looking for jobs who take those instead of importing those from across the border just to fix up somebody‘s house.

O‘BEIRNE: What this does, what the plan that came out of the Senate Judiciary Committee does, is reward illegal behavior. It does away with the problem of having illegal aliens in the country by making their behavior legal. Well, you can do away with a lot of lawbreaking if you‘re willing to do that.

George Bush has pledged in the past that he doesn‘t want to reward law breaking, he was telling the immigrants he swore in yesterday as citizens that they waited in line and did the right thing and now all these people, millions of them, are jumping right straight to the front the line.

SHRUM: That‘s incorrect. As Senator Lindsay Graham said, they would have to wait 11 years before they could apply for citizenship. Six years before they could apply for permanent resident status.

(CROSSTALK)

Kate, are you really suggesting that we‘re going to send 11 or 12 million people, call them felons and shift them out of the country and where are we going to ship them to?

O‘BEIRNE:: I‘ll tell what you the public wants based upon all the polls. Control our borders.

SHRUM: I agree with that.

O‘BEIRNE:: This has been the bait and switch that‘s been going on since the last time, since 1986 when amnesty was given in exchange for border control which never happens. Given the bait and switch the Congress is famous for, why not demonstrably control the borders, have some bench marks and then address the illegal population in America?

MATTHEWS: Thank you Bob and Kate. Somewhere on the way home I‘ll remember what we called it in Philadelphia. It wasn‘t sheet rock and it wasn‘t wall board. I‘ll think of it on the way home tonight. Up next, can Democrats turn Bush‘s sinking poll numbers into ballot box success and we‘ll bring you up-to-date on the hottest of the hardball hot races this coming November.

Anne Kornblut of The New York Times and Mike Allen of “Time” magazine will be here. This is HARDBALL only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to HARDBALL. HARDBALL‘s hot races for Decision 2006 are getting hotter by the day and leave open the question, could Congress be under new management by next year? Reporter Mike Allen wrote about that possibility in the latest edition of “Time” magazine and The New York Times‘ Anne Kornblut just returned from being on the road with Senator Hillary Clinton, whose running for re-election in 2006 and laying the groundwork for a presidential run in 2008.

ANNE KORNBLUT, THE NEW YORK TIMES: She has never really directly answered the question. She has said she‘s running in 2006 and there‘s a case to be made that she should do well in ‘06, and if she underperforms in ‘06, there‘s no way she could run in ‘08.

MATTHEWS: How can she possibly lose?

KORNBLUT: Not lose, but she could underperform if she were to get under 55 percent for example or if the Republican party in New York were able to come up with a viable candidate, which they haven‘t so far, they could chip away.

MATTHEWS: It‘s like a sports caster saying this game ain‘t over yet. She‘s rolling up the score and everyone is trying to keep the fans in the ballpark. You ever notice when you watch Monday Night Football, they don‘t tell you the score for hours if the game is not close. Hillary has put it away, right?

MIKE ALLEN, TIME MAGAZINE: They have said her number was 55-43 percent, they said she does need to exceed that. But I think the 2006 race helps her, it gives her something else that she can talk about. It‘s a way to fend of the ‘08 questions. You can keep raising money, but not have to answer questions over your specific intentions.

And they say another advantage of having a real opponent for the Republicans would be to get her on the record on some of these issues. If she has a weak opponent, she won‘t be able to be pushed and take a tough stance.

KORNBLUT: I think the reporters are going to be asking her tough questions all the way throughout.

ALLEN: You and I both know from the White House that you can ask.

That doesn‘t mean you‘ll get an answer.

KORNBLUT: It also gives her a chance, unlike the other ‘08 candidates to not have to spend all her time in New Hampshire and Iowa, it keeps her somewhat above the fray, rather than having to go from place to place. So it gives her a reason to campaign differently.

MATTHEWS: How long does it take to get election night from New York to Iowa?

KORNBLUT: Or New Hampshire. That‘s an active debate.

MATTHEWS: Let me ask you about Conrad Burns out in Montana. He‘s on the hit list.

ALLEN: I went to the fund raiser the president did for him here in Washington the other night. I thought it would mostly be lobbyist and it turned out to be a fair number of Montanans, you don‘t often get a cowboy hat at a presidential event, but the president tried to make a virtue of some of Senator Burns‘ limitations, including his inarticulateness.

The president said, well, people out in Montana don‘t need a thesaurus to know what Senator Burns is talking about. Of course he‘s been in the news because of his connections to Jack Abramoff. The president was in Georgia appearing with Ralph Reid the other day. So the president is not being shy about associating these people, he‘s been cautious about it.

Photographers never got a chance to get the president and Mr. Reid together the other week.

MATTHEWS: Is the biggest story this year politically that Hillary Clinton is going to get re-elected and launch her campaign for president, after all the talk about the Santorum race or Katherine Harris. Isn‘t the big story that Hillary is launching the campaign for president as the first woman president?

KORNBLUT: I think there‘s a number of big story lines. I don‘t think that you can take Iraq out the equation at this point, I don‘t think you can Abramoff out of the equation at this point. I don‘t think you can take Abramoff out of the equation at this point. Is Tom DeLay going to lose? Will the Democrats win back, or at least come close to winning back, either house.

That makes it such a fascinating political year and it‘s only March.

MATTHEWS: Has Hillary put her marker down yet? Is she for or against this war? Will she answer the question?

KORNBLUT: Well, she voted for it, and she has not apologized for her vote.

MATTHEWS: That‘s what I figured, but of course, she can always skip over to the left at the last minute.

KORNBLUT: I think all the Democrats are working on their message of criticizing the handling of the war, whether or not they supported it in the first place. And—see, look at you, there you go.

MATTHEWS: I‘m laughing at the political cynicism of it. It‘s the same (inaudible). We‘ll be right back with Anne Kornblut and Mike Allen.

And a reminder, for the best political debate online, just go to Hardblogger, our political blog Web site, hardball.msnbc.com. And now you can download podcasts of HARDBALL. And check out, by the way, Tom Curry‘s latest story on the high political stakes of a censure vote by Russ Feingold, at msnbc.com.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back. We‘re back at HARDBALL talking about the decision 2006 election with Anne Kornblut of “The New York Times” and Mike Allen of “Time” magazine.

Remember, fellows, back in 2000, not too long ago, John McCain was destroyed by the Christian right down in the South Carolina primary. They talked about his Indian Bangladeshi kid, right? They made fun of his—said that his wife was taking drugs. Awful stuff was spewed around. And now we have John McCain speaking at the graduation of Liberty University in Virginia, Jerry Falwell incorporated. Why is he doing this? Why is he walking right back into the people that slimed him?

KORNBLUT: In order to try and lay the groundwork to win the Republican primary. You couldn‘t win...

MATTHEWS: But isn‘t there a decency factor where you cannot take this kind of crap thrown in your face and forgive?

KORNBLUT: Well, you have to remember, at the same time, he had trashed the religious right himself. I mean, if anything, it‘s amazing that the two sides (inaudible) try to come together now. But there‘s no way he could even think about seriously running for president if he can‘t make nice with this constituency.

ALLEN: Anne is right, and what you‘re asking is the opposite. It doesn‘t mean that they‘ll accept him back, but he has to work that and has been. And as you know, he‘s been—his people have been working for literally years in South Carolina and New Hampshire, and that was a big part of the embrace of President Bush last year, was trying to get this field back, and I‘ll tell you, they are extremely suspicious and they have very long memories.

MATTHEWS: Isn‘t John McCain‘s appeal in the independent world and among moderate Democrats and moderate Republicans and the press, columnists, that he‘s independent, that he didn‘t take—he didn‘t join the team. He wasn‘t one of the elephants with his nose around—his trunk around the tail in front of him. And now he‘s acting like the elephant with the trunk around the tail in front of him. Is that going to appeal to the people that liked his maverick behavior?

ALLEN: You know, there is a small percentage risk in him hugging Bush in 2000 -- in 2004, but the calculation is that he will always get credit for having opposed Bush, gone hard against Bush. The Bushes will always be suspicious of him. But he was hoping that by getting in, he—by working with Bush, he could get his people, get his mailing list, get his fund-raisers, get his organizers, and maybe get some of the Christians who were so outraged by some of the comments that he made...

MATTHEWS: Are they going to buy this? Were you down in Memphis?

ALLEN: I wasn‘t. I watched you.

MATTHEWS: But they didn‘t buy it down there. They could see that he was John McCain pretending to be one of the herd, when he was an outrider. Can‘t they tell?

KORNBLUT: Well, that‘s what makes it—that‘s what makes it so dangerous for him, is that he‘s got to play that game and pretend, or at least look like he really appreciates them now, while at the same time, risk alienating all the Democrats who liked him before.

MATTHEWS: But remember—I‘m sorry—remember the guy—remember the movie “Batman?” The one really good one, Tim Burton‘s movie, with Michael Keaton and Jack Nicholson as the Joker? And he‘d already been through hell because of Batman, and he comes back with his face all smiling, and he says life‘s been good to me, I forgive you.

ALLEN: Well, that‘s not happening in this case.

MATTHEWS: That reminds me of John McCain. He‘s come back—oh, I have no anger at you for what you did to me.

ALLEN: Chris, isn‘t this the eternal question about Republicans? Would they rather be right than win? I think there‘s increasing signs that I know and see as well, that people close to President Bush want to win. They recognize that he needs to be succeed by a Republican. That if he‘s not, it will be written as a rejection of him, and that‘s why you have so many Bushies going to help Senator McCain, something that once was unfathomable.

MATTHEWS: So Hillary Clinton gets nominated to run for the Senate in New York, because they tried to beat Rudy Giuliani, and she‘s the only one who can beat him, right? And now he, John McCain, might get nominated as the only Republican who could beat Hillary.

MATTHEWS: Let‘s take a look at what Arnold Schwarzenegger is up to in California. He‘s taking the offensive in his reelection already. Let‘s look at a TV ad that he‘s running. Take a look.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Tomorrow‘s going to be a little better than today for Californians. Because we‘ve pulled our state back from the brink of bankruptcy. We‘ve dramatically reduced the state‘s deficit. Cut the unfair car tax. Reformed the worker‘s comp system. And created 500,000 new jobs.

Governor Schwarzenegger‘s leadership is making California work again.

(END VIDEO CLIP)

MATTHEWS: All right.

ALLEN: Well, Chris, it‘s morning....

MATTHEWS: Just like the Reagan ad.

ALLEN: Right, it‘s morning in my home state of California, it looks like. But what you‘re seeing here is a politician who recognizes that he‘s in a deep hole, and before he could ever credibly attack any opponent, you have to build up yourself. And that‘s why, you know, the campaign says they recognize the importance of message discipline and they recognize the importance of doing—spending a lot of money on this.

As you know, there‘s a lot of Bush people out there now, including the campaign manager, Steve Schmidt, who ran the war room in Bush-Cheney ‘04, and Matthew Dodd, who was the chief strategist. So I think we‘ll see a lot of Bush qualities. And one of them is repetition, message discipline, and we‘ll be seeing that in this case.

because here‘s a guy from Southern California with all those cable cars,

all that San Francisco stuff. How many Republican votes are there in San

Francisco? There are not any. What‘s he up to?

KORNBLUT: Well, I think Mike actually just nailed it. I mean, he‘s

trying to get out early and be systematic. And Steve Schmidt and Matthew Dodd are two of the sort of the best pros that Bush had. They‘ve gone to work for him.

ALLEN: It makes you feel good about your state, right? That‘s what it does, San Francisco (inaudible).

MATTHEWS: Let me ask you a big question. Bob Shrum was on earlier. He is a Democrat, obviously, but he said that if the Republicans get too tough on illegal immigration, right on wrong on the issue, protecting the borders or not, they are going to lose a lot of Hispanic voters. They‘re going to lose maybe California, and I think he‘s suggesting they‘ll lose right across the country for taking it tough. Profile in courage, you might say. Is he right?

ALLEN: No. I think—I think that this could be a big winning issue for Republicans. People think they can‘t do it. This is a way for the president to get something...

Anyway, thank you, Anne Kornblut, “New York Times.” Thank you, Mike Allen. Join us again every weekday at 5:00 and 7:00 Eastern for more HARDBALL. Right now, it‘s time for “THE ABRAMS REPORT” with Dan.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

END

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